Mountain Law: Preventing financial exploitation of seniors

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Financial exploitation of seniors is a serious problem. The typical case involves someone spending the senior's money without authorization and/or not for the primary benefit of the senior. Sadly, many cases involve exploitation by a family member or perceived friend of the victim.

How does financial exploitation occur? A common tool for financial exploitation is the durable general power of attorney in which the senior appoints someone as his or her agent to handle financial matters and the person turns out to be untrustworthy. Sometimes the financial exploitation is accomplished by other means, including coercing a senior into signing a deed or placing the perpetrator's name on a bank account; accompanying a senior to the bank to make a withdrawal for the benefit of the perpetrator; taking items of a senior's personal property; or obtaining an undocumented "loan" that will never be paid back. A common phenomenon is an individual - the "new best friend" - who ingratiates himself or herself to the senior to obtain trust and reliance, which is then abused.

Where can financial exploitation be reported? Colorado, unlike some other states, does not require mandatory reporting of suspected financial exploitation. Crimes against seniors can be reported to the department of human services, which has access to many useful resources. The department will investigate complaints and may turn them over to local law enforcement for criminal prosecution.

What criminal remedies are available for financial exploitation? The Colorado criminal code contains special provisions, including enhanced charges and preferential trial dates, designed to protect persons age 60 and older. Because of concerns that the victim may pass away or be medically unavailable to testify at trial, the code allows a prosecutor to present the victim's deposition in lieu of in-person testimony. Further, the code provides that a witness may not invoke the attorney-client privilege or similar privileges to prevent testifying in a senior abuse case.

What civil remedies are available for financial exploitation? In addition to pursuing criminal charges, seniors can sue perpetrators of financial exploitation civilly. Cases take many forms depending on the particular facts, but typically involves trying to recover assets misappropriated from the senior. If a suspected perpetrator is acting as a fiduciary, such as a trustee or agent, the court can force the fiduciary to file a report detailing the fiduciary's activities. The court then has broad powers to charge or sanction the fiduciary for misconduct. If a senior does not have sufficient capacity to handle his or her own financial affairs, an interested person can petition the court to appoint a conservator or guardian to handle the affairs for the senior. Once appointed, the conservator or guardian can then obtain necessary financial records and pursue a case against a perpetrator on the senior's behalf.

How can financial exploitation be prevented? There is no perfect way to prevent financial exploitation, but planning early for inevitable diminished capacity in later years is a must. Powers of attorney and revocable trusts are proven estate planning mechanisms to put financial decisions in the hands of someone other than a senior, but it is critical that the agent or trustee be chosen carefully. It is advisable to limit the agent or trustees' powers in the trust or power of attorney document, particularly with regard to "gifting" assets. Also, it may be appropriate to require the agent or trustee to account regularly to a trusted third person. Seniors can hire a "daily money manager" who will for a fee supervise routine financial matters such as bill paying, checking account management, budgeting and bill verification. Seniors can complete a form in advance requiring their bank to report suspected financial exploitation to the department of human services.

Noah Klug is principal of The Klug Law Firm, LLC, in Summit County, a general civil law practice. He may be reached at (970) 468-4953 or Noah@TheKlugLawFirm.com.